Recess Time! - Yeti - YETI

All work and no play makes Jack a dull boy.

That is a famous proverb from the 1600’s. It is also true for value investing.

I want to spend 95% of my time trying to find average companies, selling at below average prices. Many times these companies will have low “earnings visibility” and true earning power will be difficult to assess.

One day a month it is OK to look at “busted growth stocks”, and maybe even think about owning one in a twenty stock portfolio.

What is a busted growth stock? I would call it a stock that is down at least 50%, but still selling for more than 20x earning, 2x sales, and 5x book.

Yeti Holding - YETI - $39 is a busted growth stock. It is down from a peak of $100, to under $40. YETI still sells for 20x earnings, 1.8x sales, and 5x book.

Lets list some of the positive and negatives:

1. YETI sells a product that I can at least partially understand. I have never bought a cooler, and never will. I love the outdoors as an investment concept, but in the real world I have only been outdoors 30 times in the last 65 years, and then only to go to the horse races. I am more likely to buy an alien spacecraft, than a $400 cooler. But I can talk to other people that have bought coolers, and YETI seems to be pretty popular. Being able to understand the product, is a very important first step in evaluating busted growth stocks.

2. YETI is only 35% bigger ticket ($300 to $500) coolers, and is 65% drinkware (think thermos bottles) that run $20-$40.

3. YETI has made decent financial progress. In very rough terms they made $1 pre-pandemic, and are now making about $2 post-pandemic. The whole pandemic mess makes YETI a little difficult, but not impossible, to evaluate.

4. YETI still has interesting growth opportunities that make it possible to conclude that unit sales can continue to climb in the mid-single digit range. International sales are still under 20%, and they have added other outdoor products to their offerings (chairs, blankets, even dog bowls).

5. YETI has done well with only a few wise bolt-on acquisitions (backpacks and cookware), but has mainly grown organically.

6. YETI does not have have any fearsome competitors. Igloo is one big competitor. Igloo started as part of Brunswick, but they passed through a few private equity firms since then, and is now owned by the small Swedish conglomerate Dometic - DTCGF - that also sells RV’s. The old Coleman outdoor brand has almost disappeared under the miserable management of Newell - NWL.

7. YETI has gone from 95% wholesale (think Dicks Sporting Goods) in 2015, to 60% Direct To Consumer (DTC) in 2025. This is primarily internet orders, but YETI does have 20 stores. This is a significant positive, that I did not realize when I started my evaluation. YETI’s customer list is possibly a hidden asset.

8. YETI has done all this great growth with a pristine balance sheet. Cash is still greater than debt. This is a major positive in a busted growth stock.

9. YETI is professionally managed. The CEO ran the dental business at Danaher (a company with a superior reputation for financial discipline). This is much better than a busted growth stock run by the founders.

10. YETI is starting to make small stock buybacks. They did $100 million in 2022, and $100 million last quarter. With a market cap of $3 billion, that is a nice size to start with. Too big of a buyback program could be a problem sign.

11. YETI’s short interest is 11%. That is mildly, but not overwhelmingly, a concern. I respect short sellers (I was one for 20+ years). I would prefer short interest under 5%, but only over 20% would be disqualifying.

12. YETI has 6 buys, and 11 sell/holds. Expecatations are pretty low, a significant positive.

13. YETI is 6% owned by a growth stock manager that I semi-respect, Wasatch Advisors. Wasatch does not own too much crazy stuff. They own lots of great companies I might like to own 60% cheaper. I knew a manager that worked there years ago. They are not wild momentum chasers. If you are looking for good GARPy stocks, look at Wasatch’s portfolio.

There is plenty to like at YETI. I still want to learn more. Their products are so sturdy, I really fear they will last too long. Replacement demand could be ten years away.

The two semi-competitors Newell - NWL (Coleman + lots of bad stuff), and Johnson Outdoors - JOUT are too junky to even consider. Maybe JOUT, at 75% of book, needs more work another day.

In a perfect world I would have 10 busted growth stocks to compare YETI to, but I am a slacker and only have:

1. Portillo’s - PTLO - $9.50 - I love the food, and have know the brand for 30+ years, but I want to understand the balance sheet a little better.

2. Duckhorn Portfolio - NAPA - $7 - Wine is cool, but they made a big acquisition and a management change. Select Equity is a big buyer, so I want to learn more

3. In a perfect world I would have 8 more busted growth stocks to compare YETI to, but that is a project for another week.

I have already wasted a day on “recess'“, I will return someday. But there are real value stocks running sway from me. I have to go catch them. The big clock is always ticking.

Let’s watch the YETI’s quarter, and build a better list before we draw any conclusions.